[Click eStock] "SL, Performance Improvement Next Year with Production Recovery and New Supply... Target Price Up"

[Asia Economy Reporter Song Hwajeong] Hana Financial Investment on the 26th raised the target price of SL from 36,000 KRW to 38,000 KRW, expecting next year's earnings per share (EPS) to increase by 29% due to external growth and mix improvement from supplying high-priced items. The investment opinion was maintained as 'Buy.'

SL's third-quarter performance this year fell short of market expectations due to production disruptions at its downstream customers. In the third quarter, SL recorded sales of 712.8 billion KRW, a 5% increase compared to the same period last year, while operating profit decreased by 48% to 22.7 billion KRW. Song Seonjae, a researcher at Hana Financial Investment, analyzed, "Sales in North America, Europe, and China decreased by 8%, 10%, and 22%, respectively, due to production sluggishness caused by the imbalance in vehicle semiconductor supply. However, sales in Korea and India, where mix improvement and increased customer production effects were observed, increased by 12% and 25%, respectively, resulting in overall external growth. Despite this external growth, profitability declined due to rising prices of key raw materials and labor costs."

Initially, it was expected that sales would surpass 3 trillion KRW this year as customer production increased after recovering from the COVID-19 demand shock, but it is anticipated to slightly miss the target due to production disruptions caused by the shortage of vehicle semiconductors. However, next year, benefits are expected from increased production by customers such as Hyundai Kia Motors and GM as global automobile demand recovers. Additionally, while production of existing high-priced models such as the GV80, GV70, Carnival, Sorento, and Santa Cruz is maintained, the supply of LED lamps is expected to expand as production of electric vehicle (EV) models increases. Supply to the GM Sierra is also expected to be added. Researcher Song said, "With these combined effects, next year's sales are expected to increase by 8% to 3.2 trillion KRW, and operating profit is expected to improve by 33% to 206 billion KRW."